Microsoft needs to do a better job of convincing customers that the latest versions of its products are worth having, CEO Steve Ballmer said in a companywide e-mail on Tuesday.

Ballmer said that one way to make Microsoft products more useful is to offer more tailored versions of its main products. The company has already expanded the number of versions of Office and is also working to offer more specialized versions of Windows
Server, such as a forthcoming version for high-end computing.

"We must also work to change a number of customer perceptions, including the views that older versions of Office and Windows are good enough, and that Microsoft is not sufficiently focused on security," Ballmer wrote in a wide-ranging memo to employees,
a missive that has become something of an annual tradition as Microsoft starts its new fiscal year. In the memo, Ballmer also addresses employee morale issues, competition with Linux and the long road to Longhorn, the next version of Windows.

"We have a lot of hard work yet to do on Longhorn to deliver the right capability," Ballmer wrote in the e-mail, noting that the company has pushed back Longhorn and moved forward other products "so we can take the time to get it right."

"Longhorn is a significant step forward, and between now and then we have Tablet, digital media, security innovations in Windows XP SP2, and new Office capabilities to amaze customers," Ballmer wrote. It is not clear whether Ballmer meant that an entirely
new version of Office would come before Longhorn, though there is a reference later in the memo to Office 12--the next version of Office. Microsoft has previously said that a new version of Office that would take advantage of the new operating system was planned
for the same time frame as Longhorn. A company representative declined to elaborate on Ballmer's remarks.

The opportunity in the PC market remains strong, Ballmer said, adding that he believes the number of PC users worldwide will reach 1 billion by 2010, up from 600 million, led by growth in emerging markets.

"We must continue to compete as relentlessly as ever, while also reflecting our industry leadership responsibilities," Ballmer wrote. He said the latest server operating system is capable of taking on Linux for any task.

"With Windows Server 2003, we can compete for every commercial workload running on Linux or Unix today--even mainframes and high-performance computing--at lower cost, more efficiently and more reliably," he wrote.

Looking for a little more love
Ballmer also pointed to the company's
"Get the Facts" campaign, which uses third-party studies to show Windows cost-competitiveness, as a model for the rest of the company.

"We are effectively using independent studies by Forrester Research, the Yankee Group, IDC, Giga, Bearing Point and many others to change perceptions of the advantages of Windows over Linux when it comes to Total Cost of Ownership, functionality and productivity
advantages, support and security," Ballmer wrote. "We need to do work like this in every business to get customers to recognize our work and appreciate it fully."

The Microsoft CEO also used part of the message to address morale issues that had come up, in part, as a result of the company's decision to
cut certain benefits, including the discount offered to employees when they purchase Microsoft stock.

"We considered and rejected more substantial changes, based on employee input," Ballmer wrote, adding that the company's cost per employee will still rise 6 percent this year, spurred by skyrocketing health-care costs. Microsoft plans to cut $1 billion in
expenses in the current fiscal year, which began last week.

Ballmer did promise that employees would get raises "consistent with inflation" and that as many as a fifth of employees will get promotions this year.

"Some employees have asked why we can’t use some of our $56 billion in cash to avoid making the benefits changes," Ballmer wrote. "Using the cash reduces profits, which reduces the stock price. The cash is shareholders’ money, so we need to either invest
in new opportunities or return it to them."

The company has promised to outline a plan for that cash at or before a meeting with financial analysts at the end of this month.

Finally, Ballmer hinted at some other internal efforts, including ways to get more productivity from its sales force and a better method for predicting its revenue. He wrote that the company has had to add structure as it has grown, but added that it is
trying to avoid becoming a bureaucracy. That said, he wrote that the company must work to limit the reorganizations that have become common in recent years.

"We need to reduce churn (e.g., org. structure, people and strategy changes) and its impact on productivity, accountability and execution, and do a better job of executing well when change is necessary," he wrote.

I recall reading that Microsoft is a company that loves statistics (e.g. if 1/10 of x competitor's customers figure out how to use x feature and 9/10 of Microsoft's customers figure it out, Microsoft is doing something right). Well, give the customers
statistics. Here are a few ideas:

The amount of holes found in Windows XP before SP2 was released and the amount of those holes that Windows XP SP2 is vunerable to.

The amount of holes found in Windows XP divided by the estimated amount of people looking for holes compared tot he amount of holes found in competitors (Mac OS X, Linux, Unix, BSD) divided by the estimated amount of people looking for holes.

The amount of time saved a year using Windows XP SP2 compared to the amount of time used a year using earlier Windows versions

The costs of technical support using Windows XP SP2 compared to the cost of technical support using earilier Windows operating systems

Maybe more sucess stories (upon upgrading) would be good.

A nice presentation might be convincing. I know that this re-enforced my impression that Intel is a market leader:

"We must also work to change a number of customer perceptions, including the views that older versions of Office and Windows are good enough

If it weren't for security concerns I'd say even Office97 is good enough for just about anything a home user would want to do. Getting people to upgrade Office is just going to get harder every time. Maybe they need to figure out a way add value to Office in
way that people running pirated versions, or OSS office suites, both can afford to buy the software and have a good incentive to do so. Just using the whip (activation) isn't working. Time to break out the carrot.

prog_dotnet wrote:

and that Microsoft is not sufficiently focused on security,

Given the last two months setbacks in that area there is PR work to do.

prog_dotnet wrote:

Ballmer also pointed to the company's
"Get the Facts" campaign, which uses third-party studies to show Windows cost-competitiveness, as a model for the rest of the company.

O brother... If you want love, that is not the way to get it. People are wize to propaganda and "studies". Openness and straight communication (like C9) works alot better.

prog_dotnet wrote:

Some employees have asked why we can’t use some of our $56 billion in cash to avoid making the benefits changes," Ballmer wrote. "Using the cash reduces profits, which reduces the stock price. The cash is shareholders’ money, so we need to either invest in
new opportunities or return it to them."

Two thoughts come to mind:

1. Ey! Hands off. That's Bill's money!!
2. Investing in employee morale and incentives isn't a good investment opportunity then? That is sure going to help employees doing a better work hearing that.

lars have talked nonesense in most of the case, but there is something that some people might get confused about, why Microsoft doesn't use its money to pay more to its workers.

If you are CEO of a public company, you are legally responsible for protecting the shareholders' investment. Shareholders can sue you and your company if they think that you are wasting company's money. For example, if they think you are paying too much to
your workers than they might sue. Costco, a big retailer in America is paying above average to its workers, and investors do not like it and pressure costco to stop paying that high. That's how Wall Street work.

Again, every lie and stupid attack against Microsoft is using ignorance to make you believe in them. That's almost have been the case.

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